Apple Inc.

By: Tyler Haida

Frankie Damian
Honglu Liu
Presented March 13, 2012
AGENDA
Industry Overview
Competitors Analysis
Company Overview
Modeling
Recommendation
Industry Analysis
Consumer Electronics Industry is very competitive

Products can be looked at as a luxury and not a
necessity.

Demand is driven by the desire of the product not
the need

Demand for Apple products is expected to
continue to grow rapidly
Competitors
Google (GOOG)
o Market cap. 196.76 Billion
Hewlett-Packard (HPQ)
o Market cap. 47.62 Billion
Research in Motion (RIMM)
o Market cap. 6.76 Billion
Dell (DELL)
o Market cap. 30.15 Billion
Amazon (AMZN)
o Market cap. 83.45 Billion
Source: Yahoo! Finance
Competitors Products
Company

Phones Computers Tablets Digital Music
Players

AAPL

Yes Yes Yes Yes

GOOG Yes, kind of No Yes, kind of No
HPQ No Yes No No
RIMM

Yes No Yes
DELL No Yes Yes No
AMZN No No Yes No
MMI Yes No Yes No
Competitors Key Statistics
Company Revenue P/E R.O.A. EPS
AAPL 127.84 Billion 15.71 24.01% 35.17
GOOG 37.9 Billion 20.33 11.73% 29.76
HPQ 124.98 Billion 8.41 5.34% 2.86
RIMM 19.80 Billion 3.09 14.36% 4.25
DELL 62.07 Billion 9.02 6.74% 1.88
AMZN 48.08 Billion 133.86 2.44% 1.37
MMI 13.06 Billion N/A -.06% -.84
Source: Yahoo! Finance
COMPANY OVERVIEW
Apple Inc. (NASDAQ:AAPL) is a multinational
corporation that designs, manufactures and
markets personal computers, software, electronics
and other creative devices.

Key Statistics
Current Price $552.00
Market Capitalization 514.67 Billion
P/E 15.71
EPS 35.14
P.E.G. 0.66
R.O.A 24.01%
R.O.E 45.58%
5 yr. Annualized HPR 137%

Source: Yahoo! Finance
PRODUCTS
iPhone
iPad
Mac Hardware Products
o Desktop computers: iMac, Mac Pro and Mac mini
o Portable computers: MacBook Pro and MacBook
Air
iPod
o Touch; Nano; Shuffle; Classic
iTunes + iTunes Store
Mac App Store
Software Products and Computer Technologies
iCloud
Source: Apple 10-K (2011)
iPhone
iPad

iPod
MacBooks
Mac Desktops
Apple TV
Desktops
6%
Portables
14%
3
0%
4
0%
5
0%
iPod
7%
Music Related
Products or
Services
6%
iPhone and
realted pro &
services
43%
iPad and related
pro & services
19%
Peripherals and
other hardware
2%
Software,
service and
others
3%
Data Source: Apple 10-K (2011)
BASIC FINANCIAL DATA
Source: Bloomberg
BASIC FINANCIAL DATA
Source: Bloomberg
HISTORICAL STOCK PRICE
Source: Bloomberg
20 Day vs. 200 Day Moving Average
Source: Yahoo! Finance
New Products???
Apple Television
o display monitor or screen would be more fitting.

Apple Game Counsel
o Epic Games, CEO Mike Capps spoke of the possibility of a Bluetooth
controller being developed for the iPad. With a hypothetical controller
combined with AirPlay and an Apple TV, he believes Apple could
challenge Microsoft's Xbox and Sony's PlayStation platforms for the home
console gaming market.

Source: AppleInsider.com
Key Risk Factors
Global Economic Conditions
Highly competitive global market subject to rapid
technological change
o Wide Moat
Must successfully manage frequent product
introductions and transitions
Operating results depend on Apples ability to
obtain components in sufficient quantity
Depend on outsourcing, many outside the U.S.
Relies on third-party intellectual property and digital
content
The Apple Moat
Huge Market Share?

Industry Market Cap. of
Industry
Apples Hybrid
Industry Market
Share
Personal Computers 544.80 Billion
Internet Information
Providers (GOOG)
196.76 Billion
Diversified Computer
Systems
293 Billion
Catalog and Mail
Orders (AMZN)
149.1 Billion
Apple 514.67 Billion 43.48%
Source: Yahoo! Finance
Explaining the Hybrid Market
As we pointed out earlier Apple does NOT have a true
competitor
Not one company in the Technology industry competes
with Apple in all business segments.

So we created this Hybrid Industry to really try and put
Apples market share in perspective.

We took the market capitalization of all the industries of
Apples competitors and compared Apples Market
Cap. to this Hybrid industry instead off just the Personal
Computers Industry, which Apple clearly dominates.
The Moat Continued
Low-Cost Producer?

Apple outsources all of its production
o Because it can get it at a very low cost overseas.

Average 5 year Gross Margin of 40%
The Moat Continued
Patents, Copyrights, or Governmental Approvals
and Licenses?
Apple currently has 3.5 Billion Intangible Assets
o Typically are patents and copyrights
Very active in filing patents on new products
o Literally everything they make
They also peruse legal action

Apple is very secretive and protects its products
Source: Apple 10-K (2011)
The Moat Continued
Unique Corporate Culture?
o Just go into an Apple store
o It is no secret that the culture at Apple is very unique
High-Customer Switching Costs
o Apple doesn'tt necessarily have high switching costs but the way all of
the products integrate with each other makes it very convenient and
attractive to own more Apple products.
The Network Effect?
o This is created by being a first-mover in an emerging technology. Because
the networks value increases as more people use it, a network is created
that can create a massive moat.

So Apples Moat?
Morning Star classifies Apples moat as being
narrow

I say its bigger. moderate or even wide
Graham-Greenblatt
1 year Earnings Growth 35.17%
Graham
o 7-10 year growth 347%

Greenblatt
o APPL=353.7%
o GOOG=46.37%
o RIMM=148.26%
o HPQ=81.81%
o DELL=42.19%
Competitors Graham-Greenblatt
Company 1 yr. EPS Growth Graham Greenblatt
AAPL 35.17% 347% 353.3%
GOOG 66.67% 6.21% 46.37%
HPQ 55.58% .21% 81.81%
RIMM 32.11% 2.65% 148.26%
DELL 15.95% .26% 42.19%
Source: Yahoo! Finance
Recommendation
BUY 100 shares at the market.

Will have to get permission because it will exceed
the limit of 2.5% of initial position.